GPM makes clear why this is a brilliant idea--the gas savings and CO2 reduction of removing a 14 MPG for a 25 MPG car is huge (3 tons of carbon dioxide over 10,000 miles). There is no possible improvement that can be made to a 33 MPG to reduce carbon emissions by that amount. And, of course, it is a way of stimulating car purchases during the current economic crisis.

25 MPG doesn't seem like much. But removing the 14 MPG cars is extremely valuable, and as important today as winning the X prize with a 100 MPG car tomorrow.....

The net carbon impact of Cash for Clunkers must also take into account CO2 emissions from car production. Honda emits less than a ton of carbon dioxide to produce each vehicle. Based on Honda's numbers, replacing a 14 MPG car with a new 25 MPG car would be carbon neutral after 4,000 miles of driving, and would represent a net carbon reduction after that. (Update: More on the carbon consequences of new cars at this later post.)

There are a few moral hazard issues with this proposal that I'll let the economists sort out (i.e., junkers sitting in a yard are fixed up to make a couple of thousand dollars, but the car is worth less than the bounty, and removing it yields no carbon reduction). The proposal addresses this issue by requiring that the car be registered in the previous 120 days.